FINAL VERSION CITI 80% PROTECTED DYNAMIC ALLOCATION FUND Dynamic Allocation Rules This document (the Dynamic Allocation Rules) describes the Dynamic Allocation Rules referenced in the Supplement (as defined below) issued in respect of the Citi 80% Protected Dynamic Allocation Fund (the Fund), which is a sub-fund of CitiFirst Investments plc (the Company), an umbrella open-ended investment company with variable capital governed by the laws of Ireland and authorised by the Central Bank of Ireland. In relation to the Fund and Shares issued in respect of the Fund, this document should be read in conjunction with the Supplement issued by the Company dated 10 May 2011 as amended, supplemented or restated from time to time (the Supplement). Words and expressions used or defined in the Supplement will, unless otherwise defined herein, have the same meaning when used in these Allocation Rules. Dated 12 August 2011 1
TABLE OF CONTENTS Page Important Information...3 Reference Asset Condition 1: Reference Asset Value...10 Reference Asset Condition 2: Reference Portfolio...11 Reference Asset Condition 4: Adjustments...15 Reference Asset Condition 5: Management Fee and Fund Service Provider Fee...17 2
IMPORTANT INFORMATION Responsibility Neither the Calculation Agent nor any of its respective directors, officers, employees, representatives, delegates or agents (each a Relevant Person ) makes any express or implied representations or warranties as to (a) the advisability of purchasing or assuming any risk in connection with any transaction linked in whole or in part to any Reference Asset, (b) the Net Asset Value of any Share which is linked to any Reference Asset at any particular time on any particular date, (c) the results to be obtained by the Fund, any of its counterparties, or the Shareholders from the use of any of the calculations set out herein in relation to any Reference Asset or (d) any other matter. The Calculation Agent also makes no express or implied representations or warranties of merchantability or fitness for a particular purpose with respect to any Reference Asset and any calculations related thereto. Each Relevant Person hereby expressly disclaims, to the fullest extent permitted by applicable law, all warranties of accuracy, completeness, merchantability, or fitness for a particular purpose, with respect to these Dynamic Allocation Rules and any information contained in these Dynamic Allocation Rules and no Relevant Person shall have any liability (direct or indirect, special, punitive, consequential or otherwise) to any person even if notified of the possibility of damages. These Dynamic Allocation Rules have been prepared solely for informational purposes and nothing herein constitutes an offer to buy or sell any Shares, participate in any transaction or adopt any investment strategy or as legal, tax, regulatory, financial or accounting advice. Any decision to purchase or enter into a financial product the performance of which is linked, in whole or in part, to these Dynamic Allocation Rules, should be based upon the information contained in any associated prospectus, offering or other legal document in conjunction with these Dynamic Allocation Rules. In the case of a prospectus or offering document with a section headed Risk Factors, Investment Considerations or equivalent, please refer to that section for a discussion of certain factors to be considered in connection with an investment in the financial product described therein. During the normal course of their businesses, the Calculation Agent or any of the other Relevant Persons may enter into or promote, offer or sell transactions or investments (structured or otherwise) linked to any Reference Asset and/or any of its components. In addition, any Relevant Person may have, or may have had, long or short principal positions and/or actively trade, by making markets to its clients, positions in or relating to any Reference Asset or any of its components, or may invest or engage in transactions with other persons, or on behalf of such persons relating to any of these items. Relevant Persons may also undertake hedging transactions related to the initiation or termination of financial products or transactions, that may adversely affect the market price, rate or other market factor(s) underlying the components of any Reference Asset. Relevant Persons may have an investment banking or other commercial relationship with and access to information from the issuer(s) of any components of a Reference Asset. Such activity may or may not have an impact on any Reference Asset but potential investors and counterparties should be aware that a conflict of interest could arise where anyone is acting in more than one capacity, and such conflict may have an impact (either positive or negative) on any Reference Asset. Although the Calculation Agent will obtain information for inclusion in or for use in the calculation of any Reference Asset from sources which the Calculation Agent considers reliable, the Calculation Agent will not publish or independently verify such information and does not guarantee the accuracy and/or completeness of any of the calculations made in respect of any Reference Asset. In making calculations and determinations, the Calculation Agent shall act as principal and not as agent or fiduciary of any other person. Each Reference Asset calculated by the Calculation Agent in accordance with these Dynamic Allocation Rules is calculated on a notional basis. Investors in any Shares, or any other financial instrument or 3
transaction linked directly or indirectly, in whole or in part, to the performance of any Reference Asset will not have any proprietary interest in the relevant Reference Asset or any of the components that notionally comprise such Reference Asset from time to time. General These Dynamic Allocation Rules set out information in relation to certain calculations relevant to the Shares and the Fund. Before making a decision to invest in Shares in the Fund, you must also refer to the Prospectus and the Supplement, which are separate to this document and together describe the Company and the Fund. You should not take any action in respect of the Shares unless you have received a copy of the Prospectus and the Supplement. These Dynamic Allocation Rules, the Supplement and the Prospectus should all be carefully read in their entirety before any investment decision with respect to the Shares is made. Distribution of these Dynamic Allocation Rules and Selling Restrictions Distribution of these Dynamic Allocation Rules is not authorised unless accompanied by a copy of the Prospectus (other than to prior recipients of the Prospectus) and the Supplement. The distribution of these Dynamic Allocation Rules and the offering or purchase of the Shares may be restricted in certain jurisdictions. If you receive a copy of these Dynamic Allocation Rules and/or the Supplement and/or the Prospectus you may not treat such document(s) as constituting an offer, invitation or solicitation to you to subscribe for any Shares unless, in the relevant jurisdiction, such an offer, invitation or solicitation could lawfully be made to you without compliance with any registration or other legal requirement or it is clear from the Supplement or any addendum thereto that all registration and legal requirements for that relevant jurisdiction have been complied with. If you wish to apply for the opportunity to purchase any Shares, it is your duty to inform yourself of, and to observe, all applicable laws and regulations of any relevant jurisdiction. In particular, you should inform yourself as to the legal requirements of so applying, and any applicable exchange control regulations and taxes in the countries of your respective incorporation, citizenship, residence or domicile. 4
DYNAMIC ALLOCATION RULES REFERENCE ASSET CONDITIONS This section (the Reference Asset Conditions) sets out the terms and conditions relating to each Reference Asset, including the formulae and procedures for calculating the value and performance of each Reference Asset from time to time. Each Class of Shares shall be linked to a separate Reference Asset, such Reference Asset being denominated in the Currency of the applicable Class. Each component of the applicable Reference Asset will be determined in the Currency of that Reference Asset. Capitalised terms used but not otherwise defined elsewhere in these Dynamic Allocation Rules shall have the meaning given to them in the Supplement and shall be construed in the context of the relevant Class of Shares. In the event of any conflict between the terms defined below and such terms as they may be used or defined elsewhere, the terms defined below shall prevail. 1. COMPOSITION OF THE REFERENCE ASSET 1.1 The Reference Asset The Reference Asset in respect of each Class of Shares is a notional portfolio, denominated in the Currency of the relevant Class of Shares, comprising (i) the Reference Portfolio, which is a notional multi-asset portfolio selected by the Portfolio Advisor on an ongoing basis and providing exposure to a range of asset classes (including equities, bonds and commodities) through positions in collective investment schemes (CISs), exchange traded funds (ETFs) and certain derivative positions (as more fully described below), and (ii) the Reserve Asset, which is a notional portfolio of cash instruments denominated in the currency of the relevant Class of Shares (as more fully described below). The balance of the allocation of each Reference Asset between the Reference Portfolio and the Reserve Asset is systematically adjusted from time to time (as described in Reference Asset Condition 4 (Adjustments)). The Management Fee and the Fund Protection Fee will be deducted from the Reference Asset Value (as described in Reference Asset Condition 5 (Management Fee and Fund Protection Fee)). 1.2 The Reference Portfolio The Reference Portfolio (each a Reference Portfolio) in respect of each Reference Asset is a notional portfolio, denominated in the Currency of the relevant Reference Asset, comprising investment positions advised by the Portfolio Advisor on an ongoing basis with the aim of outperforming a benchmark of 80% global equities (as represented by the MSCI World Index) and 20% global bonds (as represented by the Barclays Aggregate Bond Index (US Dollar-Hedged)). The components of each Reference Portfolio from time to time (each, a Reference Portfolio Component) will be selected from a universe comprised of: (i) CISs and ETFs managed by the Portfolio Advisor and its affiliates (such CISs and ETFs shall be UCITS authorised pursuant to the UCITS Directive or shall be non-ucits CISs or ETFs, which may consist of regulated CISs or ETFs domiciled in a member state of the EEA, the US, Jersey, Guernsey or the Isle of Man (in accordance with the provisions of the Central Bank Guidance Note 2/03)); and 5
(ii) derivative positions, as advised by the Portfolio Advisor in accordance with UCITS guidelines. Such derivative positions will typically be used to gain access to markets or assets which may be more efficiently accessed through derivatives than either the CISs or ETFs described above. The derivative positions are expected to be notional forwards or swaps and may include, but are not limited to: (a) foreign exchange forwards (including exposure to developed and emerging market currency pairs), (b) index dividend swaps (including dividend swaps linked to the dividends of major equity indices and blue chip stocks), (c) commodity swaps (including swaps linked to commodity indices), and (d) equity swaps (including swaps linked to global and regional indices and stocks). Through the notional investment in the Reference Portfolio Components, each Reference Portfolio will seek exposure to a range of different asset classes as follows: (a) 50% 90% of its value in equity related investments (including common stock and preferred stock investments), (b) 10% - 50% of its value in fixed income investments (including bonds, debt securities and other similar instruments issued by US or non-us public or private sector issuers), and (c) up to 10% of its value in other investments (including commodity indices and currencies). The composition and value of each Reference Portfolio will be determined by the Calculation Agent in the Currency in which the relevant Reference Portfolio is denominated, using prevailing foreign exchange rates. In addition, foreign exchange forwards may be used, as advised by the Portfolio Advisor, to partially mitigate currency risk. 1.3 The Reserve Asset The Reserve Asset (each a Reserve Asset) in respect of each Reference Asset is a notional investment in a portfolio of cash instruments denominated in the Currency of the relevant Reference Asset, bearing an interest rate equal to the prevailing Interest Rate minus a spread of 0.125% per annum. 2. INTERPRETATION 2.1 Common Definitions Calculation Agent means Citigroup Global Markets Limited and its successors or assigns acting in such capacity; Currency means, in respect of: (a) (b) (c) (d) any Pounds Sterling Class of Shares, Pounds Sterling; any Euro Class of Shares, Euro; any U.S. Dollar Class of Shares, U.S. Dollars; and any other Class of Shares, the currency specified as relating to such Class in the relevant Share Class Addendum; Hypothetical Investor means a hypothetical securities dealer located in the United Kingdom, having branches and affiliates located in a number of jurisdictions including the United States, and which is deemed to enter into such Hypothetical Transactions as would be required by it from time to time in the determination of the Calculation Agent to hedge the obligations in respect of the relevant Derivative Contracts; 6
Hypothetical Investor Portfolio means a hypothetical investment denominated in the Currency of the relevant Reference Asset with a value on a relevant date equal to the product of the Reference Asset Value and the number of Shares of the relevant Class outstanding at the relevant time; Hypothetical Transactions means such hypothetical transactions as the Calculation Agent determines in its discretion would be undertaken by a Hypothetical Investor that used its reasonable endeavours to manage a Hypothetical Investor Portfolio in accordance with the rules of the relevant Reference Asset; Interest Rate means, in respect of a Currency, the benchmark overnight rate for deposits denominated in such Currency, as determined by the Calculation Agent; Portfolio Advisor means BlackRock Investment Management (UK) Limited and its successors or assigns acting in such capacity; and Reference Asset Business Day means, in respect of a Reference Asset, a day which the Calculation Agent determines to be a business day for such Reference Asset having regard to the dealing schedule of the applicable Reference Portfolio Components at the relevant time. 2.2 General Unless otherwise specified, the Calculation Agent shall make all calculations, determinations, rebalancings and adjustments in respect of each Reference Asset. The Calculation Agent shall have no responsibility for good faith errors or omissions in its calculations, determinations, rebalancings and adjustments as provided in these Reference Asset Conditions. The calculations, determinations, rebalancings and adjustments of the Calculation Agent shall be made by it in accordance with these Reference Asset Conditions, acting in its sole and absolute discretion, but in good faith and in a commercially reasonable manner (having regard in each case to the criteria stipulated herein and the Hypothetical Transactions that the Calculation Agent determines would be made by a Hypothetical Investor). All calculations, determinations, rebalancings and adjustments shall, in the absence of manifest error, be final, conclusive and binding on the Fund and all Shareholders. 2.3 Rounding Any calculations made in respect of a Reference Asset shall be made by the Calculation Agent using such rounding as it determines appropriate in its absolute discretion acting in a commercially reasonable manner. 2.4 Use of Estimates The Calculation Agent will make calculations, determinations, rebalancings and adjustments under these Reference Asset Conditions using the information, price sources or factors as specified in these Reference Asset Conditions and may undertake any of such measures in any order. However, should the Calculation Agent not be able to obtain the necessary information or be able to use the specified price sources or factors, then, after using reasonable efforts and after applying all fallback provisions as may be specified in these Reference Asset Conditions in relation to such calculation, determination, rebalancing or adjustment, the Calculation Agent shall be permitted to use its estimate (arrived at in good faith and a commercially reasonable manner) of the relevant information, price source or factor in making the relevant calculations, determinations, rebalancings or adjustments should it determine that such estimate is reasonably necessary in order to give effect to any provision or calculate any value required by any provision of these Reference Asset Conditions. 7
2.5 Methodology In making any calculations, determinations, rebalancings or adjustments, the Calculation Agent will use the formulae set out in these Reference Asset Conditions. However, the Calculation Agent may, in its absolute discretion, modify such methodology for the purposes of curing any ambiguity or correcting or supplementing any provision herein or, following any change in the basis on which any information is calculated or provided or otherwise howsoever which would materially change the commercial effect of any provision or provisions herein, amend any provision or provisions herein if such amendment is for the purpose of mitigating the effect of such change or replacing any information provider or information source named herein or any previous replacement information provider or source. The Calculation Agent may agree to consult with any person regarding any potential amendment to the methodology. 2.6 Corrections If the Calculation Agent becomes aware that any price, value, level, amount, rate, percentage or other information used by it in connection with any calculation, determination, rebalancing or adjustment in respect of these Reference Asset Conditions has subsequently been corrected or adjusted the Calculation Agent may, but shall not be obliged to, use such corrected or adjusted price, value, level, amount, rate, percentage or other information and, as a consequence, make any change, adjustment, rebalancing, determination or calculation in respect of these Reference Asset Conditions it determines necessary or desirable to give effect to, or reflect, such corrected or adjusted price, value, level, amount, rate, percentage or other information in its discretion including, without limitation, to take account of any redenomination, exchange or conversion of any Currency into a successor currency. 2.7 Reliance In making any calculations, determinations, rebalancings or adjustments, the Calculation Agent may rely upon the opinion of any person who appears to it as being competent to value any component asset or investment position by reason of any appropriate professional qualification or experience of any relevant market or asset. 2.8 Not Acting as Fiduciary In making calculations, determinations, rebalancings and adjustments, the Calculation Agent shall act as principal and not as agent or fiduciary of any other person. Each calculation, determination, rebalancing and adjustment performed by the Calculation Agent hereunder is performed in reliance upon this and subject thereto. If by performing any such calculation, determination, rebalancing or adjustment the Calculation Agent is rendered an agent or fiduciary for another person under applicable law, then the Calculation Agent's right and obligation to perform such calculation, determination, rebalancing or adjustment may be suspended at the option of the Calculation Agent (or, if already performed, its application may be suspended) until such calculation, determination, rebalancing or adjustment may be performed by the Calculation Agent as principal and not as agent or fiduciary (or until it may be performed by an appropriate third party that is willing and able to perform it). 2.9 Legislation, Rules and Regulations All references herein to legislation, notices, rules and regulations are references to such legislation, notices, rules and regulations as amended, supplemented, superseded or replaced from time to time. 8
2.10 Dates Notwithstanding that certain calculations, determinations, rebalancings and adjustments in these Reference Asset Conditions may be expressed to be "on" a certain date, the Calculation Agent may make such calculations, determinations, rebalancings or adjustments in respect of that date at any time after that date determined by it in its discretion. 9
REFERENCE ASSET CONDITION 1: REFERENCE ASSET VALUE 1. VALUE OF THE REFERENCE ASSET ON THE INITIAL ISSUE DATE On the Initial Issue Date of the relevant Class of Shares, the Reference Asset will comprise: (i) (ii) One Reference Portfolio Unit; and No Reserve Asset Units. The notional value of the Reference Asset (the Reference Asset Value) on the Initial Issue Date of the relevant Class of Shares shall be equal to one hundred units of the Currency in which such Reference Asset is denominated (e.g., USD 100, EUR 100 or GBP 100). 2. REFERENCE ASSET VALUE THEREAFTER After the Initial Issue Date of the relevant Class of Shares, the Reference Asset Value on each Reference Asset Business Day shall be an amount denominated in the Currency of the relevant Reference Asset, determined by the Calculation Agent as an amount equal to the greater of: (i) (ii) the Reference Asset Value (as defined below) on such date; and the Floor Amount (as defined below) on such date. In respect of each Reference Asset Business Day after the Initial Issue Date, the Reference Asset Value or RV for such date shall be an amount denominated in the Currency of the relevant Reference Asset, determined by the Calculation Agent in accordance with the following formula: RV = (RPV + RAV) where, in each case as determined by the Calculation Agent: Floor Amount means an amount equal to 80 per cent. of the Highest Reference Asset Value; Highest Reference Asset Value means, in respect of any day, the highest ever Reference Asset Value on any Reference Asset Business Day in the period from (and including) the Initial Issue Date of the related Class of Shares to (but excluding) such day; RAV means the Reserve Asset Value in respect of the applicable Reference Asset Business Day (as determined in accordance with Reference Asset Condition 3 (Reserve Asset)); and RPV means the Reference Portfolio Value in respect of the applicable Reference Asset Business Day (as determined in accordance with Reference Asset Condition 2 (Reference Portfolio)). The Reference Asset Value on any day which is not a Reference Asset Business Day shall be the Reference Asset Value on the immediately preceding Reference Asset Business Day. 10
REFERENCE ASSET CONDITION 2: REFERENCE PORTFOLIO 1. THE REFERENCE PORTFOLIO Each Reference Portfolio is a notional portfolio of investments, as described in the above section entitled Composition of the Reference Asset. Each Reference Portfolio is denominated in the Currency of the relevant Reference Asset and is divided into units (each a Reference Portfolio Unit) for calculation purposes. 2. VALUE OF THE REFERENCE PORTFOLIO On the Initial Issue Date of the relevant Class of Shares: (i) (ii) the Reference Portfolio will comprise one Reference Portfolio Unit; and the value of the Reference Portfolio (the Reference Portfolio Value) will be equal to one hundred units of the Currency in which such Reference Portfolio is denominated (e.g., USD 100, EUR 100 or GBP 100). Subject to the occurrence of an Adjustment Event (as defined below), on each subsequent Reference Asset Business Day: (i) (ii) the number/fraction of Reference Portfolio Units comprising the Reference Portfolio shall be determined in accordance with these Reference Asset Conditions and, in particular, paragraph 2 (Adjustment following an Allocation Event) of Reference Asset Condition 4 (Adjustments) and paragraph 3 of Reference Asset Condition 5 (Management Fee and Fund Protection Fee); and the Reference Portfolio Value shall be the product of the number/fraction of Reference Portfolio Units comprising the Reference Portfolio on such day and the Reference Portfolio Unit Value (as defined below) on such day, all as determined by the Calculation Agent, in the same Currency as the relevant Reference Asset of which such Reference Portfolio is a component, in accordance with the following formula: RPV = (RPU RPUV) where: RPV means the Reference Portfolio Value in respect of the applicable Reference Asset Business Day; RPU means the number/fraction of Reference Portfolio Units comprising the Reference Portfolio in respect of the applicable Reference Asset Business Day; and Reference Portfolio Unit Value or RPUV means, in respect of: (i) (ii) the Initial Issue Date, an amount equal to one hundred units of the Currency in which the relevant Reference Portfolio is denominated (e.g., USD 100, EUR 100 or GBP 100); and any day for which it is required to be determined, and in relation to the relevant Reference Portfolio, an amount in the Currency in which the relevant Reference Portfolio is 11
denominated equal to the value of a Reference Portfolio Unit on such day, as determined by the Calculation Agent by reference to such price sources as it considers appropriate. 3. CONSEQUENCES OF ADJUSTMENT EVENTS Upon the occurrence of an Adjustment Event the Calculation Agent may, in its sole discretion: (i) (ii) (iii) suspend the calculation of the Reference Portfolio, the Reference Asset and all other related calculations in relation to the Reference Asset until such date as the Calculation Agent determines in its sole discretion that it is commercially practicable to re-commence such calculations; make such changes to these Dynamic Allocation Rules as it deems appropriate or desirable to account for the economic effect of the Adjustment Event; or determine the value of the affected Reference Portfolio Component(s) and calculate the Reference Portfolio Unit Value at the relevant time using its good faith estimate of the value of such affected Reference Portfolio Component(s). Adjustment Event means any event which, in the sole and absolute discretion of the Calculation Agent, results or may potentially result in the Calculation Agent being unable to determine the value of any Reference Portfolio Component(s) and the Calculation Agent determines in good faith that such event has, or is likely to have, a material effect on its ability to determine the Reference Portfolio Unit Value in respect of any day for which it is required to be determined. 12
1. THE RESERVE ASSET REFERENCE ASSET CONDITION 3: RESERVE ASSET Each Reserve Asset is a notional investment in cash instruments, as described in the above section entitled Composition of the Reference Asset. Each Reserve Asset is denominated in the Currency of the relevant Reference Asset and is divided into units (each a Reserve Asset Unit) for calculation purposes. On the Initial Issue Date of the Class of Shares to which the relevant Reserve Asset relates, that Reserve Asset will comprise zero Reserve Asset Units. Each Reserve Asset Unit will accrue interest on a daily basis at the Interest Rate less 0.125% per annum, as determined by the Calculation Agent using the applicable Day Count Fraction. Day Count Fraction means, in respect of a Reference Asset Business Day, (i) the number of calendar days from, and including, the immediately preceding Reference Asset Business Day to, but excluding, such Reference Asset Business Day, divided by (ii) where the relevant Currency is Euro or U.S. Dollars, 360; or where the relevant Currency is Pounds Sterling, 365; or where the relevant Currency is a Currency other than Euro, U.S. Dollars or Pounds Sterling, such number determined by the Calculation Agent in accordance with generally accepted market practice as being the denominator for the day count fraction relevant to that Currency. 2. VALUE OF THE RESERVE ASSET On the Initial Issue Date of the relevant Class of Shares, the value of the Reserve Asset (the Reserve Asset Value) shall be zero. On each subsequent Reference Asset Business Day: (i) (ii) the number of Reserve Asset Units comprising the Reserve Asset shall be determined by the Calculation Agent in accordance with these Reference Asset Conditions and, in particular, paragraph 2 (Adjustment following an Allocation Event) of Reference Asset Condition 4 (Adjustments) and paragraph 3 of Reference Asset Condition 5 (Management Fee and Fund Protection Fee); and the Reserve Asset Value shall be the product of the number/fraction of Reserve Asset Units comprising the Reserve Asset on such day and the Reserve Asset Unit Value (as defined below) on such day, all as determined by the Calculation Agent, in the same Currency as the relevant Reference Asset of which such Reserve Asset is a component, in accordance with the following formula: RAV = (RAU RAUV) where: RAV means the Reserve Asset Value in respect of the applicable Reference Asset Business Day; RAU means the number/fraction of Reserve Asset Units comprising the Reserve Asset in respect of the applicable Reference Asset Business Day; and Reserve Asset Unit Value or RAUV means, in respect of: 13
(i) (ii) the Initial Issue Date of the relevant Class of Shares, the Reserve Asset Unit Notional Amount; and any day and in relation to the relevant Reserve Asset, an amount in the Currency in which the relevant Reserve Asset is denominated equal to the sum of (i) the aggregate amount of interest that has accrued in respect of a Reserve Asset Unit in the period from (and including) the Initial Issue Date of the relevant Class of Shares up to (but excluding) such date of determination, as described in paragraph 1 (The Reserve Asset) above, plus (ii) the Reserve Asset Unit Notional Amount (as defined below), all as determined by the Calculation Agent. Reserve Asset Unit Notional Amount means the notional amount of each Reserve Asset Unit, which is an amount equal to one hundred units of the Currency in which the relevant Reserve Asset is denominated (e.g., USD 100, EUR 100 or GBP 100). 14
1. ALLOCATION EVENT REFERENCE ASSET CONDITION 4: ADJUSTMENTS On each Reference Asset Business Day, the Calculation Agent will monitor the performance of each Reference Asset in order to determine whether there is an Allocation Event which would trigger the reallocation of exposure of the Reference Asset to the Reference Portfolio and the Reserve Asset. There will be an Allocation Event (each an Allocation Event) if, in respect of any Reference Asset Business Day, the Calculation Agent determines that the Gap Measure is (a) less than 15 per cent. or (b) greater than 25 per cent. Gap Measure means, in respect of any Reference Asset Business Day for which it is required to be determined, the percentage calculated by the Calculation Agent in accordance with the following formula: Gap Measure = (RVt FAt ) RV Χ Alloc t t where: Alloc t means the Allocation in respect of such Reference Asset Business Day; Allocation means (i) in respect of the Initial Issue Date of the relevant Class of Shares, 100 per cent., and (ii) in respect of any other Reference Asset Business Day for which it is required to be determined, the quotient (expressed as a percentage) of the Reference Portfolio Value in respect of that Reference Asset Business Day (as numerator), and the Reference Asset Value in respect of that Reference Asset Business Day (as denominator), in each case prior to any Allocation Adjustment, subject to a maximum of 100 per cent. (the Maximum Allocation), as determined by the Calculation Agent; FA t means the Floor Amount in respect of such Reference Asset Business Day; and RV t means the Reference Asset Value in respect of such Reference Asset Business Day. 2. ADJUSTMENT FOLLOWING AN ALLOCATION EVENT Upon the occurrence of an Allocation Event, the Calculation Agent will adjust the exposure of the Reference Asset to the Reference Portfolio and the Reserve Asset through the notional purchase or sale of Reference Portfolio Units and/or Reserve Asset Units as the case may be (an Allocation Adjustment) so that, subject to paragraph 3 (Complete Notional Liquidation of the Reference Portfolio) below, the Allocation after giving effect to such adjustment will be equal to, or as close as reasonably practicable to, the Target Allocation in the determination of the Calculation Agent. Target Allocation means, in respect of any Reference Asset Business Day for which it is required to be determined, the percentage (subject to a minimum of zero and a maximum of 100 per cent.) determined by the Calculation Agent in accordance with the following formula: Target Allocation = 5 Χ (RVt FAt ) RV t 15
where: FA t means the Floor Amount in respect of such Reference Asset Business Day; and RV t means the Reference Asset Value in respect of such Reference Asset Business Day. In addition, if the Reference Asset Value in respect of any Reference Asset Business Day is greater than the Highest Reference Asset Value on such day, then the Calculation Agent will increase the exposure of the Reference Asset to the Reference Portfolio so that the Allocation after giving effect to such adjustment will be equal to the Maximum Allocation. 3. COMPLETE NOTIONAL LIQUIDATION OF THE REFERENCE PORTFOLIO If, in respect of any Reference Asset Business Day, the Calculation Agent determines that the Allocation is less than 5 per cent., the exposure of the Reference Asset to the Reference Portfolio and the Reserve Asset shall be rebalanced through the notional sale and purchase of Reference Portfolio Units and Reserve Asset Units respectively so that the exposure to the Reference Portfolio is reduced to zero and the exposure to the Reserve Asset is increased by an amount that is, in the determination of the Calculation Agent, as close as reasonably practicable to the amount of such reduction (a Liquidation Event). If on any Reference Asset Business Day following the occurrence of a Liquidation Event the Calculation Agent determines that the Reference Asset Value in respect of such day, assuming for this purpose that Alloc t is at least equal to 10 per cent., will result in a Gap Measure of at least 20 per cent., the Calculation Agent will rebalance the exposure of the Reference Asset to the Reference Portfolio and Reserve Asset using the methodology in paragraph 2 above (Adjustment following an Allocation Event). If, in respect of any Reference Asset Business Day, the Calculation Agent determines that the Target Allocation in relation to any Reference Asset equals to zero, it will: a) make a final determination of the Reference Asset Value of the applicable Reference Asset; and b) cease all further calculation of such Reference Asset and all other related calculations set out in these Allocation Rules. 4. TIMING OF ALLOCATION ADJUSTMENTS Each adjustment to be made in accordance with paragraph 2 (Adjustment following an Allocation Event) or paragraph 3 (Complete Notional Liquidation of the Reference Portfolio) above will become effective as soon as is reasonably practicable in the determination of the Calculation Agent. 16
REFERENCE ASSET CONDITION 5: MANAGEMENT FEE AND FUND PROTECTION FEE 1. MANAGEMENT FEE The Management Fee (the Management Fee) is, in respect of each Business Day (as defined in the Supplement), a notional amount denominated in the Currency of the relevant Reference Asset determined by the Calculation Agent in accordance with the following formula: where: Management Fee = NAV x Rate x Day Count Fraction NAV means, in respect of a Business Day, the Net Asset Value per Share of the relevant Class of the Fund on the immediately preceding Business Day; Rate means a percentage rate per annum equal to the Management Fee percentage rate specified in respect of the relevant Class of Shares in the applicable Share Class Addendum; and Day Count Fraction means, in respect of a Business Day, (i) the number of calendar days from, and including, the immediately preceding Business Day to, but excluding, such Business Day, divided by (ii) where the relevant Currency is Euro or U.S. Dollars, 360; or where the relevant Currency is Pounds Sterling, 365; or where the relevant Currency is a Currency other than Euro, U.S. Dollars or Pounds Sterling, such number determined by the Calculation Agent in accordance with generally accepted market practice as being the denominator for the day count fraction relevant to that Currency. 2. FUND PROTECTION FEE The Fund Protection Fee (the Fund Protection Fee) is, in respect of each Reference Asset Business Day, a notional amount denominated in the Currency of the relevant Reference Asset determined by the Calculation Agent in accordance with the following formula: where: Fund Protection Fee = RPV x Rate x Day Count Fraction RPV means, in respect of a Reference Asset Business Day, the Reference Portfolio Value of the Reference Portfolio related to the relevant Reference Asset on the immediately preceding Reference Asset Business Day; Rate means 0.85% (or such other annual percentage rate as may be agreed by the Company with the Approved Counterparty under any Derivative Contract entered into after the Initial Issue Date of the relevant Class of the Fund); and Day Count Fraction means, in respect of a Reference Asset Business Day, (i) the number of calendar days from, and including, the immediately preceding Reference Asset Business Day to, but excluding, such Reference Asset Business Day, divided by (ii) where the relevant Currency is Euro or U.S. Dollars, 360; or where the relevant Currency is Pounds Sterling, 365; or where the relevant Currency is a Currency other than Euro, U.S. Dollars or Pounds Sterling, such number determined by the Calculation Agent in accordance with generally accepted market practice as being the denominator for the day count fraction relevant to that Currency. 17
3. DEDUCTION OF THE MANAGEMENT FEE AND THE FUND PROTECTION FEE On each Reference Asset Business Day (after the Initial Issue Date), an amount equal to the total value of the Management Fee and the Fund Protection Fee that have accrued since the immediately preceding Reference Asset Business Day shall be notionally deducted from the Reference Asset Value by notionally reducing such number of Reference Portfolio Units and/or Reserve Asset Units (as determined in the discretion of the Calculation Agent) which have a total value as of that Reference Asset Business Day equal to the aggregate value of such Management Fee and Fund Protection Fee. 18